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# What Does "Theoretical Payback" Tell You?

8 December 2004

The topic of "theoretical payback" percentage on casino slot machines is a topic that this column has addressed in the past, but every once in a while it's worth revisiting. The following e-mail sent in by John C. is representative of how the one statistic that casinos flaunt about slot machines is as misunderstood as it is vague:

"I'm curious about the so-called 'theoretical' percentages that a lot of casinos post for their patrons and just how accurate they actually are. I've got a rudimentary idea of what the percentages are for, but if you have any information on this subject that you could share with me, I'd appreciate it. Also, I'd like to know what is the point at which a person should avoid a particular casino because its percentage is too low."

First, a brief explanation: Theoretical payback is the percentage of money wagered on slot machines that is returned to players in the form of winnings. It is important to know that the figures can vary from day-to-day, week-to-week and month-to-month, but over the course of a year the advertised payback is right on the money.

This is because even though slot machines are delivered to casino floors from the manufacturers with "made to order" computer programs set to pay back a certain percentage of the money that people play, the mathematical probability concept upon which the programs are based require a length of time to average out.

If, for example, a machine hits for a couple of top award jackpots in a relatively short period of time, its individual payback percentage will be inflated during that period. But stretch it out to a 12-month period of almost constant play seven days a week and probability is going to kick in and reflect the manufacturer's payback configuration almost precisely.

Casinos like to flaunt their individual payback percentages because they are always in the mid-90's. When people see that over ninety percent of the money that's played in a casino's slots is returned to them as a collective group in the form of winnings, it gives them a feeling of positive expectation.

To be perfectly fair, the payback is indeed generous, especially when compared to other forms of gambling, such as the Illinois State Lottery, which returns only something like half of the money that's wagered on the games to the people who play them (the remainder going to administrative expenses and tax revenues).

It is upon sheer volume that the casinos are still able to reap millions of dollars in adjusted gross revenues from the machines each and every month. For example, during the month of June 2004, \$426,836,000 was wagered on the slots at the Grand Victoria in Elgin. Of that amount, \$401,342,000 was returned in winnings, which still left \$25,494,000 for the casino. That made for a 94.03 percent theoretical payback and a 5.97 percent casino "take" on Grand Victoria's 1,072 slot machines for June.

Don't forget that the Grand Victoria is subject to a 70 percent Illinois state gaming tax on its revenues in addition to its obligation to community taxes. It must pay salaries and administrative expenses from what's left, so that \$25.4 million "profit" from the slots in June isn't all gravy.

Now let's see how that "take" varies when denomination is taken into account: During June, the Grand Victoria's 101 nickel units netted a 13.33 percent take, while the 360 quarter machines earned 7.82, the 71 half-dollars 6.80, the 440 dollars 5.25, the 77 five-dollars 3.38, the 11 ten dollars 1.92, the 10 twenty-five dollars 4.23 and the two one hundred dollar machines 7.88.

It's readily apparent that the average take on the denominations that most people play (nickels, quarters, halves and dollars) came to something like 8.3 percent while the average take on the more exclusive five, ten, twenty-five and one hundred dollar games was 4.3 percent.

Therefore, the answer to the first part of the question is "yes", theoretical payback percentages are accurate. The trick for players is how to interpret the figures and to determine how much they mean when it comes time to decide where to play. That will be the subject of next week's column.

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John G. Brokopp

John G. Brokopp's gaming column appears in Chicago Sun Times (Chicago, Illinois), The Times (Northwest Indiana), The Quad City Times (Davenport, Iowa), The Courier News (Elgin, Illinois), The Gazette (Southwest Suburban Chicago) and Senior Wire (Denver, CO). He's also a regular contributor to The Colorado Gambler, Midwest Gaming & Travel, Casino Player and Strictly Slots. John possesses 28 years of experience as a professional handicapper, publicist, freelance writer, and casino gaming correspondent. He is also the author of two very popular books, The Insiderâ€™s Guide to Internet Gambling and Thrifty Gambling.

#### Books by John G. Brokopp:

John G. Brokopp
John G. Brokopp's gaming column appears in Chicago Sun Times (Chicago, Illinois), The Times (Northwest Indiana), The Quad City Times (Davenport, Iowa), The Courier News (Elgin, Illinois), The Gazette (Southwest Suburban Chicago) and Senior Wire (Denver, CO). He's also a regular contributor to The Colorado Gambler, Midwest Gaming & Travel, Casino Player and Strictly Slots. John possesses 28 years of experience as a professional handicapper, publicist, freelance writer, and casino gaming correspondent. He is also the author of two very popular books, The Insiderâ€™s Guide to Internet Gambling and Thrifty Gambling.